“The automotive industry and thus also Daimler are still in a very challenging environment. The continued high demand from our customers makes us confident for the fourth quarter,” Zetsche said in a statement.

Third-quarter earnings before interest and tax (EBIT) fell 27 percent year on year to 2.49 billion euros ($2.85 billion), hit by a 35 percent EBIT fall at Mercedes-Benz Cars to 1.37 billion euros.

The profit slide is accompanied by continuing friction between the German government and carmakers over whether to fit expensive emissions-reducing exhaust systems to older diesel vehicles and an ongoing U.S. investigation into emissions.

Sales of Mercedes-Benz Cars, a division that includes the Smart brand, are expected to reach last year’s level, Daimler said after reporting a 6 percent drop in deliveries in the third quarter.

Earnings were also hit by a provision taken after a court ruling confirming a ban on the R134a air conditioning fluid used in Mercedes-Benz cars, Daimler said.

Daimler last week said its full-year operating profit would fall by more than 10 percent because of “government proceedings and measures in various regions”, in what amounted to the company’s second profit warning in four months.

In May German prosecutors searched Daimler’s offices as part of a fraud investigation related to possible manipulation of diesel exhaust emission levels and U.S. authorities have asked Mercedes-Benz to explain emissions levels on certain vehicles.